Even if you have cash on hand, getting (or keeping) a home loan can be a smart financial move.

Even if you have enough money to purchase a home outright—or pay off an existing mortgage—you might not want to. Depending on your age, job security and tax status, there may be more benefits to having a home mortgage than you initially think.

Keep your cash accessible

Have you ever heard the phrase “house rich, cash poor”? This is what happens when someone’s riches are tied up in their house, but they don’t have access to cash for immediate needs. A mortgage allows you to both enjoy your home and keep cash available for other uses. In the world of finance, this is what’s known as “liquidity.”

As we’ve all seen from the COVID-19 pandemic, interruptions to income and unexpected expenses can happen at any time. Having cash liquidity in times like this can help homeowners ride out the financial storm.

And, for several years, banks have seen more retirees and seniors applying for home loans in order to free up cash for other uses or move to another area.

Save on higher-rate loans

With mortgage rates at historic lows, putting your money toward debt with higher interest rates can help you save money. Credit card debt, auto loans and personal loans almost certainly charge higher interest rates than your mortgage. By paying off high-interest loans first, you’ll reduce what your overall interest costs.

The opportunity to invest in other things

While residential real estate values typically increase over time, some have found more value in other investments. According to Consumer Reports, from 1975 to 2002, home values nationwide rose about 6% annually; the stock market return for the same period was 14%. The opportunity cost of putting all or most of your money in your house is that you can’t invest in other ways. It’s important to come up with a plan that works for your specific financial needs.

Mortgage tax benefits

Before the 2017 Tax Cuts and Jobs Act (TCJA), most homeowners with a home loan took advantage of a mortgage interest deduction in order to lower federal income taxes. With the TCJA’s significantly higher standard deductions (now $12,000 for individuals and $24,000 for married couples filing jointly, and $18,000 for heads of household) the mortgage interest deduction is no longer accessible to many homeowners. As with all tax matters, consult with a knowledgeable accountant or attorney to see how IRS guidelines apply to your specific situation.

If you itemize deductions, you may still be able deduct mortgage interest, but the only way you’ll gain is if your itemized deductions total more than the standard deduction. (Forbes has a deep dive on maximizing your mortgage interest deduction.)

In Michigan, other tax benefits may be available to some low- and mid-level income earners. Qualified homebuyers are eligible for tax benefits through the Mortgage Credit Certificate Program (MCC) for first-time homebuyers and repeat home buyers in targeted areas. Under MCC, homebuyers get a tax credit of 20% of their annual mortgage interest for up to 30 years. Borrowers must meet household income limits and the maximum purchase price is $224,500.

Making a decision

Deciding to take out new home loan or keeping an existing one can be difficult because there are so many factors involved. One way to gain clarity is to look at your financial situation, your goals and the opportunity cost of putting cash into your home. Many people find that having cash liquidity, the ability to pay off higher-interest debt and the ability to make additional investments are worthwhile benefits of getting a home mortgage or cash-out refi.

For answers to your mortgage questions, call a Consumers mortgage loan officer at 800-991-2221.

Consumers helps more than 1,000 members finance land, first and second homes, and home improvement projects each year. We’d love to help you with a mortgage or home equity line of credit; contact us online or call us at 800-991-2221.